Opponents of up to $300M in annual aid lay out economic argument against assistance program

Salem nuclear power plant

New Jersey’s three remaining nuclear power plants are making money and need not be subsidized by utility customers to remain open, according to briefs submitted to a state agency this week.

In the first formal comments in a proceeding to determine whether the nuclear units require up to $300 million in annual subsidies, critics of the subsidies argued it makes no economic sense to close the Salem and Hope Creek plants in South Jersey.

Using publicly available data, the independent market monitor for PJM, the nation’s largest power grid, contended there is no evidence — as its operator, PSEG Power contends — the plants are in danger of being prematurely retired.

“The PSEG units are economic and expected to be economic in the foreseeable future based on market data,’’ according to Joseph Bowring, president of Monitoring Analytics, LLC.

A consultant for PJM Providers Group, a coalition of power suppliers, agreed, in another brief. “New Jersey’s nuclear plants are making money — consumers should not be forced to make them more money,’’ added Paul Sotkiewicz, founder of E-Cubed Associates, LLC.

‘…highly profitable through 2023’

“Based on publicly available data and reasonable assumptions about the market, the New Jersey nuclear units are highly profitable through 2023 and face no imminent threat of retirement,’’ he argued.

Bowring, an independent economist who oversees the competitiveness of the PJM market, contended the units would net a surplus over each of the next four years — even after covering going-forward costs (things like fixed operating and maintenance expenses, labor costs, insurance) and incremental capital expenditures.

By his accounting, the surplus would range from a low of $100 million in 2021 to as high as $250 million in 2018.

Michael Jennings, a spokesman for PSEG, disputed that assessment.
“The Independent Market Monitor is rehashing arguments he made during the legislative process, which were rejected by lawmakers,’’ Jennings said.

PSEG has promised to open its books

PSEG has said it will open its books and provide the Board of Public Utilities with the detailed financial information it deems necessary, according to Jennings.

The briefs have been filed with the BPU, which is just in the opening phase of what is expected to be a six-month process to decide what, if any, subsidies ought to be given to nuclear plants, including possibly some outside the state.

After a bitter legislative battle, Gov. Phil Murphy signed a bill pushed by PSEG to potentially have ratepayers subsidize the plants, incentives the company says it needs to remain competitive with cheap natural-gas units.

Nuclear plants around the country have been shuttered because of economics. New York and Illinois have approved similar subsidies in those states to avert closing nuclear units, which provide carbon-free electricity.

Has BPU the authority to decide?

One of the issues likely to be hotly contested during the proceeding is whether the BPU has the authority to decide what the initial subsidy should be. The law establishes a $0.004 surcharge for the subsidy for an initial three-year period, a provision that could raise up to $300 million a year.

Rate Counsel director Stefanie Brand, however, argued, in a brief submitted by her office, that established utility law mandates the board can only approve “just and reasonable rates,’’ giving the agency the leeway to determine the size of the financial incentive.

The board has an obligation to ensure that rates are “just and reasonable,” a determination that “cannot be superseded by the ZEC statute,’’ Brand argued. The ZEC is the zero-emission certificate, the jargon used to define the subsidy in the bill.

“If a unit requires a subsidy less than $0.004 per kilowatt hour to continue operations, then the board must take that into account and award a lower or no subsidy,’’ Brand argued.

PSEG contended otherwise. In a brief it filed, it said, “The reasonableness of the rate is not a function of the financial conditions of the nuclear plants that receive payments — as contended by Rate Counsel — but rather is a function of the social cost of carbon that customers are paying to avoid the degradation of the air they breathe.’’